Firm Distribution Channels

Firm Distribution Channels

            A distribution channels is an essential part in a company’s marketing strategy. It is a downstream process that answer questions relating with how the company ensures that its products reach the end consumer or the final buyer. Every distribution channel should clearly indicate the intermediaries’ chain that the goods and services will pass through till it reaches to the consumer. Additionally, the distribution channel should also outline the method of payment to be use so that the money paid by the final buyer get to the initial vendor. The distribution channel should provide logistics and physical distribution which involves transportation of goods from manufacturer to the consumer, sorting, assembling, and storing the goods. The distribution channels may include internet, distributors, wholesalers, and distributors. The channels can be long or short, which varies with the total number of intermediaries involved during the product delivery. Maximizing the number of channels of distributing the products to the buyer can increase the sales. However, more channels may lead to a complex system that may make management of distribution more challenging. The car audio manufacture has to choose a channel of distribution that favors them in terms of profits as well as recording more sales.

Question A

Choosing the appropriate channel members is crucial to any firm as it has impacts on general performance and efficiency of the company.  Choosing the right channels ensures timely delivery of the products. The distribution channel should assist in delivering the goods to the final consumer on the right time (Lei, Nicolau, & Wang, 2019). Thus, the intermediaries acts as the solution to all distance hindrances that would have affected the company. The company can continue with their normal operations as they have delegates the distribution and delivery duties to the intermediaries. Hence, through the distribution channels, the manufacturers are capable of serving customers who are in far distant locations.

The distribution channel members has the role of sustaining adequate stocks of the products. This is essential as it ensures that they are enough goods to supply to the existing demands in the market. To ensure that there is sufficient stock of goods, the distributors stores the goods in the warehouse and supply them as per the demands in the economy. This ensures that there is minimal cases of cases of shortage of the products in the market thus creating trust and earning customer loyalty.

They also provides market information to the manufacturer as it serves as the medium linking the business and the consumer. The manufacturer gathers facts about the market such as the nature of competition in the market, whether stiff or low, price, and demand of related products from all the intermediaries in the distribution channel (Anđelković, Barac, & Radosavljević, 2017). The channels also collect information from the consumers about the product which include diverse suggestions on the improvement of the product and also feedback about the quality of the product. The manufacturers can then use the information given in formulating their strategies.

Distribution channels also facilitates advertising and marketing of the goods. The middlemen present in the distribution system notify and update the buyers about the product. Upon introducing the new products to the final consumers, the intermediaries provide information such as the specifications of the product, advantages and the side effects of the product. Thus, the intermediaries persuade and motivate the customers to buy the goods.

The distribution channels provide financial assistance to the business. Financing the company may be through purchasing goods in bulk from the manufactures and making payments for the goods. This ensures that the producers can cater for their manufacturing expenses comfortably. Intermediaries also sell goods to the consumers on credit. Hence, the producers are saved from credit selling that would have blocked their finances as they get their payments on time from the intermediaries. Thus, the distribution channels helps in regulating the circulation of funds in the company.

Distribution channels are also sources of employment for many people. The distribution system involves a large number of people such as distribution retailers, wholesalers, accountants, drivers, marketers, and cashiers (Alon, Jaffe, Prange, & Vianelli, 2016). These people earn their income thus improving their livelihood. Distribution channels helps in distributing risks. Production is associated with a wide number of disadvantages which would be hard to bear alone. The distributors take some of the risks such as the risk of distributing the goods to the consumers in good time. Thus the producers are left with the risks and duties of production only and are not overwhelmed with delivery duties.

Question B

When evaluating the potential intermediaries to use, the car audio manufacturer should have the criteria to compare with the various middle men. The criteria ensures that the distributors fit the requirements of the producer. This ensure that there is a smooth supply of goods to the consumers in the market. Some of the criteria include;

Product characteristics- entails the nature of the product such as perishability or technicality will determine the kind of channel to use.

Competitor’s characteristics- involves evaluating the channels used by the competitors in the business.

Market- involves the size of the market and frequency of the customers to order the products.

Middlemen- the middlemen goals should coincide with the producer’s objectives.

Company- nature of the company such as large or small and whether it is new will determine the intermediaries to involve.

Marketing environment- this depends on whether during the prosperity or recession period.

Channel compensation- dependent on the cost benefit analysis.

Question C

The car audio manufacturer should consider various criteria when evaluating which intermediaries to use in the firm distribution chain. Since there are two potential intermediaries, the manufactures must evaluate both of them using the criteria before choosing the one to use. When evaluating the product characteristics of the car stereo system, the manufacturer may check on several characteristics (Felício & Freire, 2016). Some of the product characteristics include technicality, product cost, and the perishability have a crucial duty in determining the distribution channel. If the car stereo system is more technical, the buyer may need more direct contact with the producer thus a shorter channel is needed as they require expert selling and serving talent. If the product is easier to use, then a longer channel may be used as there is a longer channel may be used as there is no difference between several intermediaries and direct contact. The car audio system is also non-perishable product, hence, a longer channel may be used where necessary so as to reach the consumers who are in a diverse geographical area. The unit value of the product also contributes in determining whether the stereo system is sold either through an indirect or direct channel. In cases of high value products such as the car stereo system, direct or short channels are used as compared to cheap products such as soap where a longer channel of distribution is applicable.

Based on the competition characteristics, the car audio manufacturer should analyze the distribution channels used by the competitors. In most cases, the similar production firms use similar distribution channels (Pietreanu, 2019). However, some of the business may tend to be unique and persuade their consumers more hence they may use distinctive distribution channels different from their competitors. A different channel also help in reducing the rate of competition. The market characteristics include the customers capability, frequency, and taste of purchasing the product, their buying habits, their geographical location, and the size of the market. The car audio manufacture may choose on a shorter distribution chain if the target audience lives in a limited area where the purchases are also not repetitive as well. Indirect channels work best in areas where the customers are dispersed over a large geographical area. The buying patterns are also essential in establishing the best chain to use (Pietreanu, 2019). Where the customers purchase their goods in a single location, the channel should include product assortment retailers. A direct channel may be used where the manufacture can make deliveries on time, the volume of the order is enormous, and the demands are not so high. The car audio manufacture should also understand the behavior of the consumer as it may help in evaluating the intermediaries to involve in the chain.

The car audio manufacturer should also check its company characteristics during the evaluation of the intermediaries. Such characteristics include management expertise, yearning for domination, and financial strength play a crucial role in evaluation of the intermediaries to be involved. Businesses with management with adequate expertise and knowledge of distribution and substantial financial resources can create a direct distribution channel (Felício & Freire, 2016). While those low financial ability as well as distribution knowledge may chose the third party distributors. New companies are more likely to depend on the intermediaries as they do not have adequate experience regarding deliveries. A company wishing to have tight control over the distribution channel may opt for the short channel as it can control, coordinate and have better communication in the channel. However, those who are just interested in the sales rather than the distribution channel may choose longer channels. The company may also sort to take intermediaries who do intense promotional campaign so they can advertise their product thus resulting to longer distribution chains.

Another criterion that the car audio company should consider is channel compensation. Channel comprises entails cost-benefit analysis.  Other key features of the cost of distribution include interest on inventory, distribution personnel’s compensation, material handling, storage insurance, transportation, and warehousing (Anđelković, Barac, & Radosavljević, 2017). This criterion is gaining popularity amongst various business in the market cost analysis area. The marketing environment may also important to consider in intermediaries’ evaluation for the firm distribution channel. Cheap and short channels are preferred during depression in the market environment. A wider choice of channel may be preferred during the prosperity. The other criterion to consider is the middlemen such as those who offer utmost support during the product promotion. The company should also consider middlemen making more sales volume at a low unit cost.

Though selection of the perfect distribution channel is hard, making proper strategic decision may lead to the prosperity of the car audio manufacturer. A company may require to engage experts when making decisions about the intermediaries to use in their channel.

References

Alon, I., Jaffe, E., Prange, C., & Vianelli, D. (2016). Global Placement and Distribution Channels. In Global Marketing (pp. 499-537). Routledge.

Anđelković, A., Barac, N., & Radosavljević, M. (2017). Analysis of Distribution Channels’ Successfulness–The Case of the Retail Chains in the Republic of Serbia. Economic Themes, 55(4), 501-519.

Felício, J. A., & Freire, C. R. (2016). From customer motivation to corporate performance. The role of strategic factors and distribution channels of financial service firms. Service Business, 10(1), 135-157.

Lei, S. S. I., Nicolau, J. L., & Wang, D. (2019). The impact of distribution channels on budget hotel performance. International Journal of Hospitality Management, 81, 141-149.

Pietreanu, C. V. (2019). Analysis of traditional Global Distribution Systems vs. New Distribution Capability. INCAS Bulletin, 11(2), 239-247.